I'm a freelance writer who has published in the New York Times, The Wall Street Journal, The Los Angeles Times and others, and the author of the Forbes ebook "The Millennial Game Plan: Career And Money Secrets To Succeed In Today’s World." I graduated Phi Beta Kappa with Honors from Stanford University and have a master of arts from Columbia University’s School of Journalism. To learn more about me, go to www.laurashin.com, or follow me at @laurashin.

The 5 Most Important Money Lessons To Teach Your Kids

Given how important financial skills are to navigating life, it’s surprising that our schools don’t teach children about money.

As a parent, however, you can teach your child important financial lessons — and you should.

“Look at the mortgage crisis and how many families lost their homes — 3.9 million foreclosures. Look at the amount of money — $1.1 trillion—we owe in student loan debt. The amount — $845 billion — we owe in credit card debt. It’s pretty clear that adults don’t know much about money. To help the next generation avoid the mistakes of their elders, and to live financially fit lives, they need to be taught the essentials about money,” says Beth Kobliner, author of the New York Times bestseller Get a Financial Life, and a member of the President’s Advisory Council on Financial Capability who spearheaded the creation of Money as You Grow, which offers age-appropriate money lessons for children.

“The sooner parents start taking advantage of everyday teachable money moments (for example, give a six-year-old $2 and let her choose which fruit to buy), the better off our kids will be. Parents are the number one influence on their children’s financial behaviors, so it’s up to us to raise a generation of mindful consumers, investors, savers, and givers,” she says.

Below are the top money lessons to be learned at each age, as well as activities to illustrate each point.

Ages 3-5

The Lesson: You may have to wait to buy something you want.

“This is a hard concept for people to learn of all ages,” says Kobliner. However, the ability to delay gratification can also predict how successful one will be as a grown-up. Kids at this age need to learn that if they really want something, they should wait and save to buy it.

Money lessons at this age set the tone for later on. “You really can’t start too early,” says Kobliner. Speaking of her own family, she says, “When we go into a store, if I say, ‘We don’t have money for this,’ they’re smart — they know we have credit cards,” So, she would say, “We’re here to buy a gift for X, and we’re not going to buy anything for you, because we’re not here for that.” Kids then quickly learn that going into a store doesn’t always mean you’ll buy something.

Activities For Ages 3 To 5

1. When your child is waiting in line, say, to go on the swings, discuss how important it is to learn to wait for what he or she wants.

2. Create three jars – each labeled “Saving,” “Spending” or “Sharing.” Every time your child receives money, whether for doing chores or from a birthday, divide the money equally among the jars. Have him or her use the spending jar for small purchases, like candy or stickers. Money in the sharing jar can go to someone you know who needs it or be used to donate to a friend’s cause. The saving jar should be for more expensive items.

3. Have your child set a goal, such as to buy a toy. Make sure it’s not so pricey that they won’t be able to afford it for months. “Then it just gets frustrating, and it gets hard for them to wrap their head around. It’s really more about her being cognizant that she’s saving for a goal than, ‘Oh, I really need her to scrape together those $10 to buy the tutu.’ You want to set them up for success,” says Kobliner. If your child does have an expensive goal, come up with a matching program to help her reach it in a reasonable timeframe. (Kobliner says that while an allowance is a personal choice for every family, at this age, a small allowance could help a child save for these goals.)

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Emily Interesting piece. Being the father of a 13-year-old, I do wonder about the lessons for that age group. Let’s say I follow this advice. If I give my daughter $100. And go to the local Chase branch to open a CD. The branch manager will tell her she needs $1,000 to buy a CD. But if she cries or threatens to throat punch him, let’s say they made an exception and let her open a CD with $100. The rate for a 120-month CD is 0.90. Plug those numbers into the calculator and….by the time she’s 23 and graduated from Brown, my daughter has got a nest egg waiting for her that totals—wait for it–$109.37 The take home lesson: She’s waited 10 years to earn enough money to buy a banana smoothie, and bottle of green nail polish.

Allen, I think you’re being a little too cynical with the current plight of the economy/government. Laura provided great lessons, which should serve as a foundation for all kids. As we know, the landscape will always be different and being equipped with basic money skills will help them navigate through the possible rough terrains of life ahead.

Jason FWIW, that’s what my wife said. And you’re both right–interest rates won’t always be below one percent–but I do think it’s important to get kids to actually “do the math” especially when we have online tools that can help us research real-world numbers and run real world scenarios with them.

Mom of 11 and 12 yo boys, and it’s an interesting article–I do have a couple of comments:

Totally agree with Allen St. John–the interest rate for most of my boys’ lives has been low, low, low. I think it’s just as important to discuss other ways to make money outside of plain vanilla savings and cd accounts. The tween years are a good time to introduce the idea of stocks, bonds, etc.

If you wait until high school to talk to your kids about college costs, you’ve waited too long.

And, I think it would be a really good idea to have kids work at least one job before finishing college. My 12 yo has a 1x per week paper route, and he’s already learned some important money lessons. (like hates the time it requires but loves the profit, and how hard it can be to get people to pay up….) I’m not sure you can truly learn any money lessons if the funds are wholly from your parents.

I love the idea of helping your kids by teaching them in the grocery store and helping them understand why your are buying what you are. I never learned that as a kid. I remember in college I had no idea what I was doing in the grocery store. My sister came with me a few times and taught me how to shop frugally.

These are some great lessons to teach your kids early on instead of having them figure it out themselves when it could hurt or get them in financial trouble.

This for me is a very key article, being the mom of a 2-year-old and 8-year-old I find this info to be key for me to put into practice. On several occasions I have thought about doing this but never put into practice this article has become very effective and can be easily incorporated with everyday life.

Great article on in financial education. The “Money Savvy Pig” is a highly, sophisticated piggy bank that is perfect for getting my young daughter excited about seeking out loose change that have slipped through couch cushions!

Nice article, but I take issue with the premise that “adults don’t know much about money”. We know a lot about money, what we did know was how unstable things can be. As a baby boomer, I realize that the old plan will not work. I did a study for one of my children, graduating from college and earning $37,500 a year. Using conservative estimates, even if she saved 45% of her gross income in order to have enough money to live on when she stopped working at at 68 years old, she would run out of money in less than 20 years. Saving is important, but it is not enough and it is not the final answer. She is not saving even 10% now and earning nothing on what she does save. The real question is, what spending is going to be wise or not? How do they spend what they have to improve the situation that we have gotten ourselves into? Start a business? I advise my children to avoid retirement accounts, and invest in other things.

Reading Modern Money Secrets to them would be the best lesson you could teach them. It teaches them the most very basic question, what do we actually use for our medium of exchange, who manufactures it, how it is put into circulation, and what can be done to prosper from the use of honest money.

One of the reasons I give my children cash – is so they can see what happens. You use it on trivial unnecessary impulse buys or even if you use it on good buys – you see the money slowly disappear. This is a visible act and children can easily learn why it’s important to wisely manage their money. Author of: For Children How to become rich successful and do well in school